Mergers and Acquisitions – Part 2

Much as we admire the government’s handling of mergers and acquisitions, as we saw in the last post titled Mergers and Acquisitions, the government has a lot to learn from private businesses on the right way of doing mergers and acquisitions.

Take the case of the recent acquisition of Flipkart, India’s largest online retailer, by Walmart. Excuse my ignorance, but I was honestly not aware of the real reasons behind Walmart’s acquisition of Flipkart for USD 16 billion, the largest e-commerce deal in the world. Ever. 

Because they can, is what I had always put it down to, when news of this event had first surfaced, barely giving a second thought to what the real reason might have been. Till I was enlightened by several articles in April and May this year, like one titled “Walmart-Flipkart: How will you benefit” in MSN Money.

Benefit? Me? USD 16 billion? They did it for me? Unbelievable.

As opposed to mergers of government entities that have absolutely no impact on the common man, private businesses, it emerges, are competing hard to merge and acquire for the good of the common man. Yes, for you and me.

Now, I am the first to admit that I have been quite critical of corporate actions being at odds with their stated intentions. But Walmart bought Flipkart for me? I still can’t believe it. But the evidence is overwhelming.

Through the various articles I came across during that period, I learnt that Walmart bought Flipkart for USD 16 billion in order to serve customers, support job creation, small businesses, farmers, and women entrepreneurs.

I learnt that Walmart bought Flipkart for USD 16 billion to partner to create sustained economic growth across agriculture, food, and for extensive job creation through development of supply chains, commercial opportunity, and direct employment.

I learnt that Walmart bought Flipkart for USD 16 billion to support the ‘Make in India’ programme of the government, through direct procurement as well as increased opportunities for exports through global sourcing and e-commerce.

I learnt that Walmart bought Flipkart for USD 16 billion to partner with Kirana (mom and pop grocery) store owners and members to help modernise their retail practices and adopt digital payment technologies. They will also support farmers and develop supply chains through local sourcing and improved market access.

I learnt that Walmart bought Flipkart for USD 16 billion so that the Indian consumer base – a huge chunk of which is the middle class, gradually moving to lower middle – can benefit from cheaper prices through Walmart’s playbook, which has seen success across the world.

Silly me.

I had always thought Walmart bought Flipkart for USD 16 billion because executive incentives are aligned to phantom metrics that reward not shareholder value creation but short term revenue spike.

I had always thought that Walmart bought Flipkart for USD 16 billion because companies take advantage of their over-valued stock to make an acquisition while their currency is strong.

I had always thought that Walmart bought Flipkart for USD 16 billion because of the vanity of decision makers.

I had always thought that Walmart bought Flipkart for USD 16 billion because of fear of competition stealing a march over them.

I had always thought that Walmart bought Flipkart for USD 16 billion to become a giant in the space it operates in and makes its owners rich beyond belief.

But I could not have been more wrong. It was me all along. They bought Flipkart for me.

“Everything I do, I do it for you”…sang Bryan Adams.

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8 thoughts on “Mergers and Acquisitions – Part 2

  1. Your sarcasm was homing in on the right target in the world of commerce: profit is the only thing that big corporations care about. I am not surprised that Walmart is making inroads into the lucrative market of India. Great post, Ankur!

    • Thank you Peter. I am glad that that point, about corporations caring only about money, comes across. I am shocked when I see that smart people are taken in by corporate talk about them doing their business for the good of the world.

  2. On a serious note, I did think this would be a great plus to Walmart stock, if not for customers like you and I. Time will tell. But we do have one hopeful note: The US stock market has added $9 trillion dollars to investors’ pockets in the last 20 months. Walmart got about 10 points of that. Who knows? You may get rich yet!

    • And I have no issues with that. That is what they have been created for. If someone gets richer and richer while pursuing legitimate business activities, then good for him. The issue here is that corporations try to assume God-like stature and perpetrate the myth that they are in it for the good of humankind. And people start believing the canard.

  3. On a serious note, Jacqui (https://worddreams.wordpress.com/) really touched on a sore point. This whole point that is quoted all the time that ‘it is good for the economy, it is good for shareholders, the market has added dollars to the investors’ pockets’ etc etc, is really avoiding the fact that not all people are investors, not all people have their wealth in the market. As a pensioner on a fixed govt pension I gain nothing from the ‘market’. I gain nothing from Amazon, for example, making products here in Australia cheaper because they contribute to my small local retailers going out of business.
    When a company claims that it has sold out to a foreign takeover because it is due to the market, or due to their fiscal responsibility to the shareholders they very seldom say that the decision was actually made by a small number of very rich and powerful persons – by actual men and women. It is easy if you can place the responsibility onto a non-person and say, in effect, we didn’t do it. It was ‘the Market’ that forced our hand.

  4. I fully agree. And that is exactly what I am saying. Corporations do not owe any responsibility to the millions of unorganised common folks. They work like a cabal to maximise profits for their shareholders. And they go wrong as well when shareholders lose value. Vanity is a common variable in many of the impossibly large deals we hear of.
    I think this is where our governments are failing us. Today’s governments are buying into the myth of corporates operating for the good of the common man. It is not their job. It is the job of the government and one that cannot be outsourced. Purely in monetary terms, I think we are not extracting a fair price for allowing corporations to violate resources and make money and steal dignity from sincere, hardworking people.

  5. Of course it was for you! 😀 But honestly, I have high expectations through this move. A more robust and competitive market that was otherwise being shadowed by the might of Amazon. It talks a lot of the potential of mass Indian consumers and truly get accessibility at fingertips!

    • I would be wary of putting myself at the mercy of a corporation. They don’t owe a thing to us. What if Walmart and Amazon decide to combine the online retail business? Or one buys the other? But let us not worry about future possibilities. Let us make hay while the sun shines and competition keeps prices low 🙂

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